economics and analysis Flashcards Preview

series 7 take 2 > economics and analysis > Flashcards

Flashcards in economics and analysis Deck (53):
1

GDP

-total value of all good and services
-published quarterly

2

CPI

-consumer price index
-is a measure of inflation
-published daily

3

describe an ideal economy

-GDP is up
-CPI is down
-moderate inflation

4

describe a general business cycle

-expansion-goes up
-peak-prosperity
-decline-goes down
-trough
-recovery-moves back up

5

what are the 5 leading economic indicators

-building permits
-manufacturers' new orders
-S&P 500 index
-M2 (money supply)
-new unemployment claims

6

what are the 4 coincident economic indicators

-GDP
-industrial production
-personal income
-manufacturing and trade sales

7

what are the 2 lagging economic indicators

-corporate profits
-duration of unemployment

8

what 3 things can influence the economy

-fiscal policy (congress/president)
-monetary policy (federal reserve)
-federal reserve

9

how does fiscal policy affect economy

-taxation (high = deflation, low = inflation)
-government spending

10

what is keynesian theory?

active government manipulation of the economy

11

describe M1 money supply

cash + demand deposits (checking accounts)

12

describe M2 money supply

M1 + CDs + money market mutual funds

13

describe M3 money supply

M2 + negotiable CDs

14

what are the tools that the federal reserve board can use to influence economy?

-multipliers
-federal funds
-discount rate
-open market operations

15

federal reserve board has control over?

bank reserve requirements

16

describe the multiplier FRB tool

-is the most drastic tool
-changes reserve requirements banks must have in their position

17

describe the fed funds FRB tool

-bank's excess reserves to lend

18

describe the discount rate FRB tool

-rate charged from feds to banks for loaning
-all rates are affected by the discount rate

19

describe the open market operations FRB tool

-fed buys t-bills from institutions to make interest rate go down
-fed sells t-bills to institutions to make interest rate go up

20

what happens if the value of a dollar goes up

-exports less competitive
-imports more competitive

21

what happens if the value of a dollar goes down

-exports more competitive
-imports less competitve

22

what are defensive (noncyclical) securities

basic human needs
-food
-utilities
-clothing
-drugs
-tobacco
-liquor
-cosmetics

23

what are cyclical securities

can go way up or way down
-steel
-heavy equipment
-capital goods
-automobiles
-toy companies

24

what are countercyclical securities

-precious metals (gold)

25

assets=

liabilities + net worth

26

net worth=

assets - liabilities

27

working capital=

current assets - current liabilities

28

current ratio=

current assets / current liabilities

29

debt ratio=

long term debt / total capitalization

30

earnings per share=

net income / # of common shares

31

price to earnings ratio=

current market value / earnings per share

32

dividend payout ratio=

common dividends / earnings per share

33

when analyzing the market technically, what would a person use?

-price forecasting
-timing

34

what is the odd lot trading theory?

says to do the opposite of what the little guys are doing

35

what are the 4 market indiices

-dow jones composite
-nyse composite
-wilshire
-S&P

36

describe the components of the dow jones composite

-looks at 65 companies
30-industrials
20-transportation
15-utilities

37

how many companies make up the NYSE composite?

3,000+

38

how many companies make up the Wilshire composite?

5,000

39

how many companies make up the S&P?

500

40

what kind of recommendation for growth objectives?

-growth mutual fund and reinvest earnings

41

what kind of recommendation for income objectives?

-income funds and dont reinvest earnings

42

what kind of recommendation for preserving capital objectives?

-govt
-govt backed
-blue chip stocks

43

what kind of recommendation for liquidity objectives?

-money markets
-IRAs, keoughs
-Roth IRAs

44

what is credit risk?

risk of company going bankrupt

45

what is business risk?

risk of industry doing poorly

46

what is market risk?

risk of market decline

47

what is purchasing power risk?

has to do with inflation risk

48

what is marketability risk?

ability to resale security

49

what is taxed as ordinary income?

earned money
-salaries
-wages
-commissions
-bonuses

50

describe passive income

says that passive losses can only be used to offset passive income

51

what is the 30 day wash rule

-investor exits position with a loss, then reestablishes position in an identical security with 30 days before or after trade
-NOT ALLOWED

52

what are examples of progressive taxes?

-income
-estate
-gift

53

what are examples of regressive taxes?

-sales
-fuel